Valuation analysis for Travelers Companies Inc (NYSE:TRV)
What is the fair value of the DJIA? This is the 29th report issued publicly by Stock Traders Daily in an attempt to answer that question. Using data already supplied to clients of Stock Traders Daily, this analysis and the analysis of the other DJIA components offer conclusive evidence.
In the second quarter of 2011 Travelers Companies Inc (NYSE:TRV) experienced a setback that caused their earnings to fall to a loss of $0.91 per share. Since that time earnings have rebounded and earnings growth has been realized, but generally there are some concerns and given that EPS decline in 2011 some of the valuation metrics remain skewed slightly.
Travelers is a company that experiences setbacks like that when insurance claims increase dramatically, usually as a result of a natural disaster of some sort. Therefore, it is wise for investors who are reviewing Travelers to also look at revenue growth. Our observations tell us that revenues have been increasing from the fourth quarter of 2012, but they look neutral when dating back further.
This combination and the associated volatility in earnings as reported by Travelers often causes Travelers to distort the overall growth rate of the Dow Jones industrial average as well (DIA), and a quick look at the EPS growth chart we have provided below explains why. This EPS growth chart shows us that Travelers has grown on a trailing 12 month annualized basis by 64% and 26% respectively since 2012; those were the peaks, with troughs near the flat line (no growth). These wild undulations make proper valuation sometimes difficult.
According to our real time trading report for Travelers the stock tested longer term support two short weeks ago and has already increased to within striking distance of longer-term resistance. The move in Traveler's was aggressive, but the stock is so close to resistance now that the opportunity to buy Traveler's based on the longer-term chart patterns does not currently exist. At these levels; so long as longer-term resistance levels remain intact, not only would Travelers not be a buy at current levels, but short Sellers may also be interested in the stock.
Travelers report's sporadic earnings results from time to time, revenue growth is not currently in a decidedly upward sloping trend, and the stock has increased to within striking distance of longer-term resistance. At best we would consider the EPS and revenue growth rate at Travelers to be questionable and that means that the stock is absolutely capable of declining back towards longer term support again if longer term resistance levels remain intact. We would not be buying Travelers here.